Becoming FI without investing - is it possible?

[RiddleMB]

I know that FIRE (generally speaking) is about saving the monthly income and investing it.


The first part is easy to me - being a frugal person and a minimalist, I manage to save about 50% of my monthly income (after taxes).

What does concern me a is the investing part. I read JL Collin's Stock Series and got the right mindset of "not panicking when the market goes down", but the stock market still seems like a massive inconvenience to me.

Thus, I wonder - is it possible to retire early without investing in stocks, when not having any other source of income apart from a job? (no real estate to rent or sell either) I know it is a bit of a general question, for it involves many day to day aspects, but I'm trying to figure out how vital investing is for FI.


My first point of concern is that, living outside of the US and Europe, investing comes with a limited choice of stocks, high fees, and additional taxes, turning index funds like VTI to be not cheap.

My second, and way bigger concern: I like to be in control with the many aspects of my life, money is one of them. The stock market is a chaotic and unpredictable, thus makes me worried and uncomfortable, despite knowing that the market always goes up, as Jim likes to repeat.

Any opinions or personal stories will be apprechiated!

[MrThatsDifferent]

Well, I guess there are 5 ways I can think of:
1. Inheritance/winning the lottery
2. Massive income or own the business and sell it for a massive profit
3. Real estate, see arebelspy
4. Go the ERE route and drop expenses to virtually nothing
5. Government career or some job with a great pension plan

3 and 5 seem to be the most common. I was scared of investing too and realised, oh, that’s why I’m poor.

[ender]

Most of the FI material that exists is heavily western culture focused.

If you don't live there, the concepts can still apply, but the mechanics of what to do/etc may be different.

What part of the world do you live in?

[Dicey]

Which is worth more to you? Your need to be in control or your desire to FIRE? Cant gave both, at least not in the way you're defining control. This may seem off the wall, but I think you need to examine what's driving your fear. Start there.

Inflation makes it virtually impossible to save your way to FIRE. And compound interest is the engine that makes it happen. Without both, you're dead in the water, unless you win the lottery (which mustachians don't play), inherit a fortune, or find a giant pearl on the ocean. No, wait, that last one didn't work out so well.

[MMMarbleheader]

My immigrant grandfather did it by owning rental real estate and building houses for people where he held the mortgage. This was the 1980s though and interest rates were 5x they were today so he got a great return on his private lending.

[flipboard]

My first point of concern is that, living outside of the US and Europe, investing comes with a limited choice of stocks, high fees, and additional taxes, turning index funds like VTI to be not cheap.

Can't help with taxes - but in terms of funds: many European and US brokers accept foreign customers, and let you buy the same funds (or at least ETF's). You'd still have to pay taxes locally, but you can avoid the local fees. You'd have to tell us which exact country you live in though.

My second, and way bigger concern: I like to be in control with the many aspects of my life, money is one of them. The stock market is a chaotic and unpredictable, thus makes me worried and uncomfortable, despite knowing that the market always goes up, as Jim likes to repeat.

Honestly, the stock market is still a lot less risky than most currencies in the world. Again, this depends on where exactly you live, but currency devaluation has happened to many countries.

It is true that some people are a bit too positive about the stock market growth, but it's real and highly unlikely to stop in the long run. It has a better history than holding cash.

[RiddleMB]

What part of the world do you live in?

I live in Israel, but I am not Jewish, just a legal alien.

I think my only redeeming quality is that I do not want kids, so family and wife are out of question - that will save me some.

many European and US brokers accept foreign customers

Yes, I know some people are working with Interactive Brokers or MB Trading. Since VTSAX is available only to US citizens I can buy only VT or VTI, but I'll still have to pay 25% of each dividend I recieve.

[wenchsenior]

What part of the world do you live in?

I live in Israel, but I am not Jewish, just a legal alien.

I think my only redeeming quality is that I do not want kids, so family and wife are out of question - that will save me some.

many European and US brokers accept foreign customers

Yes, I know some people are working with Interactive Brokers or MB Trading. Since VTSAX is available only to US citizens I can buy only VT or VTI, but I'll still have to pay 25% of each dividend I recieve.

I agree with previous comments re: investing as the most efficient way to get to FI.  But I specifically want to point out that marriage tends to improve the typical household's financial situation (as long as you don't divorce).  And just b/c you don't want kids doesn't mean you can't get married if you want to. Easily a third of my extended social circle (friends, work acquaintances, family) doesn't have kids for reasons ranging from 'Oh, hell no' to 'Meh, maybe, but it's not a priority.'  Why do you assume marriage is out of the question b/c you don't want kids?

[flipboard]

What part of the world do you live in?

I live in Israel, but I am not Jewish, just a legal alien.

I think my only redeeming quality is that I do not want kids, so family and wife are out of question - that will save me some.

many European and US brokers accept foreign customers

Yes, I know some people are working with Interactive Brokers or MB Trading. Since VTSAX is available only to US citizens I can buy only VT or VTI, but I'll still have to pay 25% of each dividend I recieve.

VT and VTI are better than VTSAX. (ETF's are often cheaper than funds, and never more expensive - and Vanguard seem to be working towards making ETF's alwasy cheaper than funds). And they don't have the silly minimums that you need for funds. [Note: US-dom funds are available to US residents, not US-citizens. One does not correspond to the other.]

Dividend taxes are a complicated subject - but you should be aware that almost all countries will tax dividends. It looks like the US and Israel have a dual-tax agreement, so tax withheld in the US should count towards Israeli taxes. The dividends would be taxed anywhere you live, but this isn't a big issue.

But if the dual tax agreement doesn't help, you can buy Ireland domiciled ETF's, where there's 0% withholding in Ireland (but some withholding is lost on e.g. US dividends before they reach the Irish fund, but at 15% it's lower than in most other places - and withholding for the rest of the holdings is closer to 0).

[HBFIRE]

I suppose you could, but yikes why do that to yourself?  You're going to constantly have a battle against inflation which is in my view more stressful than simply having sensible investments.  Thinking about my money's value slowly eating away no matter what is a very dismal thought.  When I think of this I'm picturing insects slowly eating my pile of cash.

Someone told me a story of a person who was about to retire and never checked their 401K balance.  When finally calling in to check it, it turns out they had forgotten to actually select an investment choice -- they didn't understand how a 401K vehicle worked and just assumed it was already invested.  The balance was ~ 250 K and would have been closer to 900 K had it been invested.

[BTDretire]

I think there must be a solution for investors outside the US, but don't have it.
That said, the market made a huge difference in my retirement.
 Between 1-1-12 and 12-31-17 my net worth increased by $1,050,392, most of it
was stock market gains, about 20% of that amount was from savings.
 I can only hope the future does as well.

[Bernard]

Question:
"Could I find sexual pleasure without a human sex partner? I don't like dealing with people; most of them have issues. So I wonder if sex toys could do the trick? It would probably save me money as well . . .

Answer:
You probably can, to dome degree. But why would you want to? It's true that having to deal with another human being may be challenging sometimes, but if you find the right partner, the benefits will outweigh the challenges.

[RiddleMB]

Why do you assume marriage is out of the question b/c you don't want kids?

Oh that is an easy one :) - Most people from my nation (I'm Russian) put kids as the main goal of their lives, and the main reason to get married. The locals here have the same mindset and they hate us, Russian (that is ok, I don't like them either). In addition, I'm opposed to the idea of marrige itself, which again, most women don't share. As a result, the chances for me to find a suitable partner for life is almost zero. That is fine by me.

It looks like the US and Israel have a dual-tax agreement

Yep, I do pay only once.

You're going to constantly have a battle against inflation which is in my view more stressful than simply having sensible investments

Agree 100%. That is why I'm torn in my decision and considering all the possibilities.


Side note:

Question:
"Could I find sexual pleasure without a human sex partner? I don't like dealing with people; most of them have issues. So I wonder if sex toys could do the trick? It would probably save me money as well . . .

I used to think that women sex toys are rediculus (I'm a man so I don't use any), until I talked to several women that said these toys are more safe and sometimes pleases them way more than some half drunk duoche in a pub. I absolutely agree with them. Having a suitable partner is great, but usually rare.

[Villanelle]

Sure, anything is possible.

To illustrate that, imagine you start the net big internet phenomenon, and someone buys you out for $1billion USD.  Certainly you could live quite comfortably forever without ever investing a penny.

Clearly that's not an actual plan, but it illustrates the fact that without any kind of investment, you can still retire.  You just have to have a LOT more money to fund the same lifestyle.  Less than $2m in earnings (spread out over years, with about half spent and half invested) could probably find a $40,000 USD lifestyle indefinitely, adjusted for inflation.  However, that some amount put under a mattress or in a fairly low yield savings account isn't going to get you close to $40,000 (adjusted over the time of your retirement.  So yes, you can do it, but you are just going to need a lot more money to fund the same retirement as you would if you invested.

Also, you don't seem to be a huge fan os living in Isreal, so have you considered moving?  Heading off to a cheaper place once you are done earning money (or now if you can find a job that still pays well in that cheaper place) is going to help all of this, whether you invest or not.

[cloudsail]

Yes, my father-in-law never invested in anything and retired in his fifties. He made a very good income as a realtor. He is probably the only realtor I know who didn't invest in real estate, though he does have one rental property that used to be their primary residence. If he had invested, at all, in anything (real estate or stocks), my husband's family would be really, really rich by now. As it is they are just comfortable, and my father-in-law is only in his seventies so we've yet to see if his cash will last the rest of his life or get eaten up by inflation. Fortunately he lives in a country with free health care and can collect retirement money. He also has children who all make high incomes and will come to his rescue if he becomes destitute in his last years.

It's not a pretty picture for non-investment.

[Ocinfo]

It is. I recently looked at this myself, just out of curiosity. I’m about halfway to my FIRE # with about 90% low fee index funds. If I went all bonds and high yield savings, it would add less than 2 years to my accumulation phase compared to average stock gains. This is mainly because my savings rate is high and time frame is relatively short (<5 years). That said, you’d need a lot more money to be FIRE if you don’t shift into riskier investments as your safe withdrawal rate will probably be ~2% or less.


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[RiddleMB]

I guess there is no way to escape investment AND retire early. Suppose I'll need to slay thay dragon inside of me.

A follow up question (don't know if I should open a new thread):
In his Stock Series, Jim Collins has a post called "What if Vangard gets nuked", in which he says that since US citizens are buying a part of Vangard itself, the stocks they own are written on their name, thus in case Vangard is no more, the stocks remain.

How does the brokers operate in such a case? (Interactive Brokers or MB Trading - for I know these two work with Israel)
I know that many brokers have SIPC, but on whom the stocks are written? What happens to one's investments if a broker is to gets busted?

[DadJokes]

Without investing? No. Even squirreling money away in a savings account is still "investing."

Without investing in the stock market? Probably. You can still invest in real estate or a business.

[mtnrider]

VT and VTI are better than VTSAX. (ETF's are often cheaper than funds, and never more expensive - and Vanguard seem to be working towards making ETF's alwasy cheaper than funds). And they don't have the silly minimums that you need for funds. [Note: US-dom funds are available to US residents, not US-citizens. One does not correspond to the other.]

Assuming you're in a country that allows either mutual funds or ETFs - don't forget to factor in the ask-bid spread and brokerage costs.  Mutual funds don't incur the cost of ask-bid spreads.  I'm pretty sure that if you have enough for Admiral mutual funds, you get the same fee structure as the corresponding ETF, but without the ask-bid spread.

[SwordGuy]

Well, I could shoot myself in the foot and then enter a foot race.   I could traverse the track by dragging myself along since I chose not to be able to walk or run.

But what the hell is the point of doing that?

[vand]

Of course it is. Stocks are not the be all and end all for successful investing, although they may be the one of the most easily accessible forms of passive investments.
The higher your income and the higher your savings rate the less your portfolio's IRR matters; it's increasingly becomes more about contributions. In drawdown most of your portfolio should not be in stocks in most cases.

[HBFIRE]

Of course it is. Stocks are not the be all and end all for successful investing, although they may be the one of the most easily accessible forms of passive investments.
The higher your income and the higher your savings rate the less your portfolio's IRR matters; it's increasingly becomes more about contributions. In drawdown most of your portfolio should not be in stocks in most cases.

Couple things.  1, OP specifically said investments not stocks.  That would include bonds.   2, While Savings rate is the biggest mover to get you TO fi, smart investing is what will keep your stash from eroding to inflation for the rest of your life.  When you're talking about a 30+ year horizon, it's almost impossible without having some kind of investment vehicle unless you have a massive stash and an insanely low WR.  small note: most keep more than 50% in stocks even after retiring.

[NorCal]

It's possible, but much harder. 

My dad is somewhat of an example.  He lives a very simple lifestyle and saves a ton from his teachers salary.  He never invested a dollar in his life until a few years ago.  Although he does manage a rental property that he inherited.  I'd guess his net worth is close to $2M at 70, on top of his teachers pension.  He could have retired earlier, but he never thought about it.

Recently, by dad has picked up some non-traditional investing, which are things that might work for you.  Both of these options are absolutely sub-optimal, but they could still be a better option than not investing at all:

1. Buy an annuity.  Just keep it to something that has a simple structure to it.
2. My dad bought a complex financial product from Wells Fargo that guarantees no principal loss.  Money gets locked up for a multi-year period.  If the market goes up, you only get a portion of the gains, but you're guaranteed not to lose your principal.  I'm not really a fan of these products, but they can still be superior to a checking account.

[HBFIRE]

My dad is somewhat of an example.  He lives a very simple lifestyle and saves a ton from his teachers salary.   I'd guess his net worth is close to $2M at 70, on top of his teachers pension. 

Wow, that's insane.  Professor?  Most don't even earn close to 2 M during their entire career on a teacher's salary let alone save that much.  To do that without investing is astounding.

[vand]

Of course it is. Stocks are not the be all and end all for successful investing, although they may be the one of the most easily accessible forms of passive investments.
The higher your income and the higher your savings rate the less your portfolio's IRR matters; it's increasingly becomes more about contributions. In drawdown most of your portfolio should not be in stocks in most cases.

Couple things.  1, OP specifically said investments not stocks.  That would include bonds.   2, While Savings rate is the biggest mover to get you TO fi, smart investing is what will keep your stash from eroding to inflation for the rest of your life.  When you're talking about a 30+ year horizon, it's almost impossible without having some kind of investment vehicle unless you have a massive stash and an insanely low WR.  small note: most keep more than 50% in stocks even after retiring.

Actually, he said this:

> Thus, I wonder - is it possible to retire early without investing in stocks, when not having any other source of income apart from a job? (no real estate to rent or sell either) I know it is a bit of a general question, for it involves many day to day aspects, but I'm trying to figure out how vital investing is for FI.

As for your 2nd point, this is not true either. The bond market is twice as large as the equity market. Bet you didn't know that, did you? Who buys those bonds? Bond funds. And who own bonds funds? Well, let's say that retirees tend to own more bonds than non-retirees.

[HBFIRE]

> Thus, I wonder - is it possible to retire early without investing in stocks, when not having any other source of income apart from a job? (no real estate to rent or sell either) I know it is a bit of a general question, for it involves many day to day aspects, but I'm trying to figure out how vital investing is for FI.

As for your 2nd point, this is not true either. The bond market is twice as large as the equity market. Bet you didn't know that, did you? Who buys those bonds? Bond funds. And who own bonds funds? Well, let's say that retirees tend to own more bonds than non-retirees.

The original question is "Becoming FI without investing - is it possible?"

Of course everyone knows the bond market is huge.  That doesn't change my point and is a strawman.  Most early retirees will maintain more than 50% of their portfolio in stocks depending on total portfolio size and WR needs.  Why is that?  Because a long investment horizon has to be able to combat inflation.

[NorCal]

My dad is somewhat of an example.  He lives a very simple lifestyle and saves a ton from his teachers salary.   I'd guess his net worth is close to $2M at 70, on top of his teachers pension. 

Wow, that's insane.  Professor?  Most don't even earn close to 2 M during their entire career on a teacher's salary let alone save that much.  To do that without investing is astounding.

Several factors to expand on the wealth:

1. My dad spends an incredibly small amount of money.  He doesn't even pay for garbage service, and just takes his garbage to work.  He finally broke down and bought a cell phone (flip phone) last year.  He doesn't have internet service at home.
2. He teaches at a community college, but has gone back and forth between teaching and administration.  I'd guess his peak earnings were around $125-$150K/year.  He's currently in an odd status of being "retired" from administration, but still teaching a few classes each semester.
3. He has pretty much worked every day of his life since he was 14.  He worked his way through college.  He took his first sick day ever last year.
4. He bought the house we grew up in for $20K in the Bay Area in 1980.  He now lives in a bigger house, but has consistently owned Bay Area real estate since 1980.  He also inherited the rental property in napa (it's pretty run-down).  I'd guess this is where about half of his net worth came from.
5. I did forget that he owned a rental property for about 5 years while we were growing up.

[Fishindude]

I think there are a whole lot of people that retire with almost no savings and can live OK on a modest pension and social security income.

[RiddleMB]

1, OP specifically said investments not stocks.  That would include bonds.

I meant mainly stocks indeed.

If I go this route, I plan to buy 100% stocks, VTI to be specific.
MMM and JL Collins hold stocks only. As for me, having a good discipline, low expenses and good income allow me to be fine when the market plunges.

Also, you don't seem to be a huge fan os living in Isreal, so have you considered moving

That is my life dream. Unfortunatly, Israeli passport is the only one I have, so I can't move anywhere without a job offer first (which I'm constantly trying to get).